Econ test two - Economic Growth- upward trend in real GDP,...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economic Growth- upward trend in real GDP, reflecting expansion in the economy over time Productivity- output per hour of work Productivity Growth-% increase in productivity from one year to the next Returns to Labor- Production Function- Y=F(K,L) Y=GDP K= Capital Input L=Labor Input T=tech Y=F(L,K,T) Diminishing returns to capital – additional units of capital will result in an increase in output, but the increase becomes smaller and smaller. Increases in capital (holding the quantity of labor constant) will result in shifts the production function higher. However, subsequent increases in capital shifts the production function by a smaller and smaller distance. Growth Accounting Formula- growth rate of productivity=1/3(growth rate of capital per hour of work) + Growth rate of technology Capital- machines, factories, oil tankers, and other physical resources in the producion of goods and serices Depreciation- amount by which physical capital wears out over a given period of time Capital Formula- Capital end of this year= net investment during this year + Capital at end of last year Human Capital- A person’s accumulated knowledge and skills
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Econ test two - Economic Growth- upward trend in real GDP,...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online